Key points include:
- European Supervisory Authorities should develop a common approach on the use of the comprehension alert for financial products that are not simple and are difficult to understand, and provide further (Level 3) guidance on the qualifying criteria. The comprehension alert is an essential tool to address flawed product design leading to consumer detriment, and complementary to measures aimed at addressing mis-selling at the point of sale. Clarifying the criteria based on existing evidence would reduce the risk of divergence in national approaches and improve comparability.
- The risk indicator should take account of currency risk where relevant. The example of Swiss franc mortgages sold in various EU member states shows the importance of this.
- Products with a different risk profile during their lifetime than at maturity, such as products that offer principal protection at maturity, should include a warning or an additional risk indicator to show the maximum risk in the event of early exit.
- Performance scenarios included in the information document should take account of fees.
- We make various recommendations on the way that information is displayed in the document to improve retail investor understanding.